Breaks in oil deliveries via the Druzhba pipeline to Belarus, Ukraine, Poland, the Czech Republic, Hungary, Slovakia and Germany are an opportunity to discuss the diversification of gas supplies. Polish refineries increase its import from other than eastern directions, thanks to what, PKN Orlen for example could work without deliveries through the Druzhba pipeline even for several months. Refineries in Belarus were affected by last break the most. Three years ago, the construction of a reverse allowing for the transfer of oil through the pipeline from the west to the east, was considered. It would give Belarus a chance to diversify. How realistic is this prospect for Minsk? Bartłomiej Sawicki, journalist of BiznesAlert.pl is trying to answer this question.
Belarusian plans or Belarusian dreams?
Sergey Grib, deputy chairman of the Belarusian Oil Company (BNK), said at the end of last week that by the end of this year, Belarus intends to start importing non-Russian oil. However, he did not mention the date of launching its transport. The import by sea, and then by rail from the Baltic States or from Ukraine from the port of Odessa can come into picture here. According to Belarus, the Baltic States and Ukraine are interested in additional crude oil supplies. As Grib argued, it is an additional income for them.
Geographical location and pipeline and railway connections mean that Belarus is doomed to import oil from Russia. For several years, this country has been importing single loads of oil through the oil pipeline in Odessa on the Black Sea. It is oil from Iran, Azerbaijan and Venezuela, which is transported to the Belarusian refineries in Mozyr and in Novopolotsk by rail. Odessa has a pipeline connection with the southern branch of the Druzbha oil pipeline. However, there is no direct pipeline connection from Odessa. The situation is similar in case of the Baltic countries, that is the Latvian ports in Butynga or Ventspils. However, railway is a logistically difficult and expensive alternative, bearing in mind long-term supplies.
These were single supplies from the aforementioned directions, and the commentators interpreted them as an element of the political game and an attempt to defend Lukashenko’s greatest independence from Moscow. Oil pollution which occurred in the Druzbha oil pipeline, as all indications show, was the result of error or technical problems. According to the pipeline operator in Russia, the Transnaft it was a mistake of Samaratransneft-terminal company. The Transnaft spokesperson said that oil pollution in the Druzhba pipeline was intentional and oil was polluted through Samaratransneft terminal – its owner is a private company that accepts oil from several small producers and analyzes its quality. Information coming from Russia and Belarus indicates unintended actions. This is a different situation from what Minsk has tried to deal with so far, because previous breaks were always result of political reasons.
Belarusian refineries are prepared to process heavy crude oil. Oil from Iran or Venezuela could be an alternative for Minsk, however, the price of imports and difficult logistics make it impossible in the long term to rely on its import via Ukraine, by sea. The Belarusian declaration may, however, only be a signal that in the next months Belarus will consider increasing the import of only spot deliveries, and this depends on the price of oil at a given moment and price opportunities on the market. The Iranian direction may be risky due to US sanctions imposed on Tehran.
Poland can extend a helping hand
Although the sanctions imposed against Iran will rather not affect Belarus directly, it is likely that the United States would be able to impose it on Minsk due to the prevailing regime of Lukashenko. However, Ukraine, which cares about relations with Washington, is not likely to risk them, helping Belarus. So oil from Saudi Arabia or Azerbaijan, can come into a picture and rather this latter can be expected in Belarus this year.
Poland is missing in considerations above. Warsaw could potentially be the best solution for Belarus when it comes to imports by sea, thanks to the reverse on the pipeline. It does not exist at the moment but it can be built in the future.
At the end of 2016, Rafal Miland, the vice-president of PERN which is Polish oil pipeline system operator, said that there was interest from potential investors to expand the oil pipeline between Poland and Belarus so that the oil could flow in the other direction from west to east. The company wanted to check whether the eastern part of the pipeline between Poland and Belarus could be extended with a reverse direction. The goal was to analyze potential demand for such service in Belarus, for example in the situation of interruptions in the supply of oil from the east. Such analysis was carried out in 2017. It was to assess technical capabilities, cost and the potential of customer interest on the east. The words said in 2016 seem to be prophetic from the perspective of April 2019. However, as we find out, the analysis for which PERN secured financial resources, did not go beyond the walls of the cabinets. Only conceptual, technical and, above all, market-based analyzes have come to light. The technical part of such a project would not be complicated to implement. The answer to the question whether it will be a wish to use the reverse on the other side of the border is the basic doubt around the project.
Last year, in an interview with the BiznesAlert.pl portal, Rafał Miland said that in case of the reverse for Belarus, it would be necessary to define what other technical and investment activities would be required. He argued that the Belarussian side would have to show interest in supplies from Naftoport and a contract for using our pipelines for such operations. – It has not happened so far. We had a survey question on this subject, but no specifics followed. Currently oil going from Belarus is still flowing in one direction – he said, stressing that the interest of the market, in this case the Belarusian one, is crucial.
PERN asked in April about a reverse project towards Belarus stressed that nothing has changed in this matter due to the lack of market interest. – The analysis was commissioned for the purposes of the reverse to Adamów. The Belarusian side did not confirm its interest in construction. We are open to possible cooperation in this area – PERN reports. The question arises whether the 2-3-week break in the supply of high-quality crude oil to refineries and losses in the form of lost profits in the export of petroleum products and damages to the installation will not make the market interest arise? However, it would involve a reorientation of Minsk’s energy policy. Spot deliveries by sea and rail, are different case, as they do not involve long-term policy, and would still mean only the game between Minsk and Moscow, not the signal of opening to the West.